Updated: Apr 16
If you run a business or are responsible for business development/business growth, you probably have respect for marketing that works, and an equal amount of disdain for the one-off, tactical marketing pushes that aren’t rooted in commercial targets and fail to bring about a return.
To do the grown-up marketing that works, we need to determine:
Commercial targets that are both grounded and sustainable for our business
What our marketing budget is
The size and scale of our marketing efforts
At Teach a Brand to Fish, we have determined a set of calculations that have worked, time and again, for SMEs looking to determine their grounded revenue targets, as well as the best course of action to take.
If you’re curious as to what simple maths can do for determining your best path to using marketing to achieve commercial targets, here’s everything you need to know about the calculations for grown-up marketing.
1. How to calculate sustainable commercial targets (and from that, your marketing budget)
Determining a commercial target for your small/medium firm that is both grounded and sustainable is exactly where grown-up marketing begins. While you might love to generate €5 million in revenue in 12 months, consider that achieving €5 million warrants a €500,000 marketing budget.
A good rule of thumb is that your marketing budget should be 10% of your commercial target. So if spending half a million on marketing this year sounds inconceivable, then a smaller commercial target will likely be more sustainable. Perhaps a €20,000 marketing budget, which would mean a revenue target of €200,000, feels more congruent for you.
2. How to calculate the minimum scale and size of your marketing
This calculation is an essential part of determining a Marketing Strategy because it will inform the minimum size and scale of the marketing you will do in the next 12 months.
Let’s say a €200,000 commercial target with a €20,000 marketing budget is the number that feels congruent for you. Your marketing strategy could look something like this:
Your total revenue = X new clients multiplied by Y average transactional value
So, €200k equals = 10 new clients at €20k each.
In other words, if your product/service is sold at €20k, and your target revenue for the year is €200,000, then you will need to acquire 10 new clients/make 10 new sales this year.
Now how will you achieve 10 new sales with marketing?
Enter the 1:20 ratio.
In our decades of solving exactly this same problem, every day, all day for SMEs and companies, we have determined that, in general, for every 20 perfect-for-you prospects you appear in front of, 1 will buy your product/service.
If your goal is to make 10 new sales, then this means you will have to appear before 200 perfect-for-you prospects.
3. What this tells us about the minimum scale and size of your marketing
These calculations are set out in your Marketing Strategy, and they inform your Minimum Viable Marketing Campaign.
A Minimum Viable Campaign is a marketing campaign developed and executed with just the core elements needed to move a specific target market into momentum, filling the middle of your sales funnel with a view to 5%-35% return.
Based on the calculations above, we know that you need to appear in front of 200 perfect-for-you prospects across 12 months in order to get 10 new sales and earn €200,000 in revenue. This could mean appearing before 20 prospects per month, 60 per quarter or 200 per year.
By “appearing before,” we mean planning, building and rolling out a Minimum Viable Campaign for 4 weeks, then iterating, refining and repeating that campaign every 4 weeks for 3 consecutive months, targeting your 200 High-Value Leads. The MVC will consist of at least 3, but usually 4 meaningful touchpoints with each High-Value Lead.
You can learn more about what goes into a Minimum Viable Campaign here.
When it comes to a grown-up marketing campaign that works, there are a few simple calculations that can mean all the difference. These results with determining between marketing success, and marketing that doesn’t deliver.
When creating a Marketing Strategy, we want to determine:
Our sustainable revenue targets, and therefore our marketing budget
The minimum scale and size of our marketing to achieve said revenue targets
From there, we can craft the kick-ass Minimum Viable Campaign that will help us see our commercial goals realized.